Tit-for-tat tariff threats but not likely to lead to a full blown trade war

The Office of the US Trade Representative (USTR) released its list of targeted tariffs of 25% for about 1,300 products on US$50bn of Chinese imports. This followed after USTR's Section 301 investigation on China’s unfair practices relating to the intellectual property and forced technology transfer. The US tariff on Chinese products are mostly on intellectual property related products, such as aerospace, information and communication technology, robotics industries as well as products tied to machinery for apparel and textiles manufacturing, see Fig 1.

China retaliated against US's decision to impose tariffs, with its own tariffs on up to US$50bn of about 106 US products, which include commodity and consumer goods, such as soybeans, automobiles, chemicals and aircraft. The retaliation by China was also higher than previously announced value of US$3bn on 23rd March 2018. With China's immediate retaliation to the US tariff, markets are concerned that there is strong likelihood of further trade tariffs and trade restriction by the US on Chinese imports, where these actions may hurt global GDP growth expansion, leading to slower global trade, and possibly raising the risk of inward-looking policies and global protectionism among countries.

Source: Affin Hwang Research - 5 Apr 2018